Pareto Improving Inefficiency

Debashis Pal (), Arup Bose and David Sappington

University of Cincinnati, Economics Working Papers Series from University of Cincinnati, Department of Economics

Abstract: We examine the effects of a systematic increase in the agents operating costs in a standard agency setting with moral hazard. We identify conditions under which the agent benefits from the increase in his costs. Perhaps more surprisingly, we show that the principal and he agent can both benefit from the increase in the agents costs under plausible conditions. Thus, increased inefficiency can be Pareto-improving.

Pages: 18 pages
Date: 2008
New Economics Papers: this item is included in nep-cta
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.artsci.uc.edu/collegedepts/economics/research/docs/Wppdf/2008-04.pdf (application/pdf)

Related works:
Journal Article: Pareto-improving inefficiency (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cin:ucecwp:2008-04

Access Statistics for this paper

More papers in University of Cincinnati, Economics Working Papers Series from University of Cincinnati, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sourushe Zandvakili ().